A heuristic approach to the design of fortified distribution networks

Lean distribution networks have been increasingly exposed to the risk of unpredicted disruptions causing significant economic forfeitures. At the same time, the existing literature features a limited number of studies which consider fortification of facilities for improving network reliability. In this paper, we develop a reliable uncapacitated fixed-charge location model with fortification to support the design of distribution networks. The model considers heterogeneous facility failure probabilities, one layer of supplier backup, and facility fortification within a finite budget. The problem is formulated as a nonlinear mixed integer programming model which is proved to be NPNP-hard. We develop a Lagrangian relaxation-based (LR) heuristic solution algorithm and demonstrate its computational efficiency for solving large-scale problems.

► We develop a reliable uncapacitated fixed-charge location model. ► We consider heterogeneous failure probabilities and one layer of supplier backup. ► Model incorporates facility fortification within a finite fortification budget. ► An efficient Lagrangian relaxation solution heuristic is developed. ► Sensitivity analysis is conducted on the rate of return on fortification.